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Income Taxes
 12 Months Ended
Apr. 25, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

13. Income Taxes

Income before income taxes is as follows (in millions):

 

 

Year Ended

 

 

 

April 25, 2025

 

 

April 26, 2024

 

 

April 28, 2023

 

Domestic

 

$

606

 

 

$

472

 

 

$

420

 

Foreign

 

 

777

 

 

 

791

 

 

 

646

 

Total

 

$

1,383

 

 

$

1,263

 

 

$

1,066

 

The provision (benefit) for income taxes consists of the following (in millions):

 

 

Year Ended

 

 

 

April 25, 2025

 

 

April 26, 2024

 

 

April 28, 2023

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

131

 

 

$

89

 

 

$

209

 

State

 

 

38

 

 

 

25

 

 

 

39

 

Foreign

 

 

128

 

 

 

110

 

 

 

150

 

Total current

 

 

297

 

 

 

224

 

 

 

398

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

(102

)

 

 

24

 

 

 

(44

)

State

 

 

(16

)

 

 

6

 

 

 

(3

)

Foreign

 

 

18

 

 

 

23

 

 

 

(559

)

Total deferred

 

 

(100

)

 

 

53

 

 

 

(606

)

Provision (benefit) for income taxes

 

$

197

 

 

$

277

 

 

$

(208

)

 

During the fourth quarter of fiscal 2025, the Internal Revenue Service (“IRS”) substantially completed the examination of our fiscal 2018 and fiscal 2019 U.S. income tax returns, and we recognized a tax benefit of $36 million attributable to the release of related tax reserves.

During the second quarter of fiscal 2023, we completed an intra-entity asset transfer of certain IP to our international headquarters (the “IP Transfer”). The transaction resulted in a step-up of tax-deductible basis in the transferred assets, and accordingly, created a temporary difference where the tax basis exceeded the financial statement basis of such intangible assets, which resulted in the recognition of a discrete tax benefit and related deferred tax asset of $524 million during the second quarter of fiscal 2023. Management applied significant judgment when determining the fair value of the IP, which serves as the tax basis of the deferred tax asset. With the assistance of third-party valuation specialists, the fair value of the IP was determined principally based on the present value of projected cash flows related to the IP which reflects management’s assumptions regarding projected revenues, earnings before interest and taxes, and a discount rate. The tax-deductible amortization related to the transferred IP rights will be recognized in future periods and any amortization that is unused in a particular year can be carried forward indefinitely. The deferred tax asset and the tax benefit were measured based on the enacted tax rates expected to apply in the years the asset is expected to be realized. We

expect to realize the deferred tax asset resulting from the IP Transfer and will assess the realizability of the deferred tax asset quarterly.

 

In September 2010, the Danish Tax Authorities issued a decision concluding that distributions declared in 2005 and 2006 by our Danish subsidiary were subject to Danish at-source dividend withholding tax. We did not believe that our Danish subsidiary was liable for such withholding tax and filed an appeal with the Danish Tax Tribunal, which issued a ruling in favor of NetApp in December 2011. However, following escalations within the Danish judicial system over the course of numerous years, on January 9, 2023, the Danish Supreme Court ruled the 2005 dividend was subject to withholding tax while the smaller 2006 distribution would not be subject to withholding tax. The Danish Supreme Court ruling on the distributions declared in 2005 and 2006 is non-appealable. During fiscal 2023, we recorded $69 million of discrete tax expense, which includes $23 million of withholding tax and $46 million of interest.

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate as follows (in millions):

 

 

Year Ended

 

 

 

April 25, 2025

 

 

April 26, 2024

 

 

April 28, 2023

 

Tax computed at federal statutory rate

 

$

290

 

 

$

265

 

 

$

224

 

State income taxes, net of federal benefit

 

 

14

 

 

 

22

 

 

 

24

 

Foreign earnings in lower tax jurisdictions

 

 

(14

)

 

 

(40

)

 

 

(43

)

Stock-based compensation

 

 

(21

)

 

 

12

 

 

 

25

 

Research and development credits

 

 

(31

)

 

 

(22

)

 

 

(24

)

Benefit for foreign derived intangible income

 

 

(28

)

 

 

—

 

 

 

—

 

Global minimum tax on intangible income

 

 

12

 

 

 

46

 

 

 

61

 

Tax charges (benefits) from integration of acquired companies

 

 

1

 

 

 

4

 

 

 

(27

)

Tax benefit due to IP Transfer

 

 

—

 

 

 

—

 

 

 

(524

)

Resolution of income tax matters (1)

 

 

(39

)

 

 

(4

)

 

 

71

 

Other

 

 

13

 

 

 

(6

)

 

 

5

 

Provision (benefit) for income taxes

 

$

197

 

 

$

277

 

 

$

(208

)

 

(1)
During fiscal 2025, we recognized a tax benefit related to the IRS examination of our fiscal 2018 and fiscal 2019 U.S. income tax returns. During fiscal 2024, we recognized a tax benefit related to the lapse of statute of limitations for certain issues in our fiscal 2020 U.S. tax returns. During fiscal 2023, we recognized tax expense related to a Danish Supreme Court decision related to withholding tax on a 2005 distribution as well as tax expense related to the IRS examination of our fiscal 2018 and 2019 U.S. tax returns.

The components of our deferred tax assets and liabilities are as follows (in millions):

 

 

 

April 25, 2025

 

 

April 26, 2024

 

Deferred tax assets:

 

 

 

 

 

 

Reserves and accruals

 

$

188

 

 

$

126

 

Net operating loss and credit carryforwards

 

 

138

 

 

 

129

 

Stock-based compensation

 

 

25

 

 

 

25

 

Deferred revenue and financed unearned services revenue

 

 

250

 

 

 

252

 

Acquired intangibles

 

 

483

 

 

 

499

 

Capitalized research and development (1)

 

 

198

 

 

 

141

 

Other

 

 

6

 

 

 

12

 

Gross deferred tax assets

 

 

1,288

 

 

 

1,184

 

Valuation allowance

 

 

(119

)

 

 

(121

)

Deferred tax assets, net of valuation allowance

 

 

1,169

 

 

 

1,063

 

Deferred tax liabilities:

 

 

 

 

 

 

Prepaids and accruals

 

 

87

 

 

 

90

 

Acquired intangibles

 

 

84

 

 

 

68

 

Property and equipment

 

 

26

 

 

 

36

 

Other

 

 

6

 

 

 

3

 

Total deferred tax liabilities

 

 

203

 

 

 

197

 

Deferred tax assets, net of valuation allowance and deferred tax liabilities

 

$

966

 

 

$

866

 

 

(1)
As required under the Tax Cuts and Jobs Act of 2017, research and development expenditures are capitalized and amortized beginning in our fiscal 2023.

The valuation allowance decreased by $2 million in fiscal 2025. The decrease is mainly attributable to corresponding changes in deferred tax assets, primarily certain state tax credit carryforwards.

As of April 25, 2025, we have federal net operating loss carryforwards of $9 million. In addition, we have gross state net operating loss and tax credit carryforwards of $4 million and $146 million, respectively. The majority of the state credit carryforwards are California research credits which are offset by a valuation allowance as we believe it is more likely than not that these credits will not be utilized. We also have $9 million of U.S. foreign tax credit carryforwards and $33 million of foreign tax credit carryforwards of which the majority were generated by our Dutch subsidiary and are fully offset by a valuation allowance. Certain acquired net operating loss carryforwards are subject to an annual limitation under Internal Revenue Code Section 382, but are expected to be realized with the exception of those which have a valuation allowance. The state and foreign net operating loss carryforwards and credits will expire in various years from fiscal 2026 through 2042. The federal net operating loss carryforwards, the California research credit, and the Dutch foreign tax credit carryforwards do not expire.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):

 

 

Year Ended

 

 

 

April 25, 2025

 

 

April 26, 2024

 

 

April 28, 2023

 

Balance at beginning of period

 

$

220

 

 

$

222

 

 

$

220

 

Additions based on tax positions related to the current year

 

 

8

 

 

 

7

 

 

 

9

 

Additions for tax positions of prior years

 

 

4

 

 

 

—

 

 

 

1

 

Decreases for tax positions of prior years

 

 

(25

)

 

 

(2

)

 

 

(5

)

Settlements

 

 

(139

)

 

 

(7

)

 

 

(3

)

Balance at end of period

 

$

68

 

 

$

220

 

 

$

222

 

As of April 25, 2025, we had $68 million of gross unrecognized tax benefits, of which $45 million has been recorded in other long-term liabilities. Unrecognized tax benefits of $47 million, including penalties, interest and indirect benefits, would affect our provision for income taxes if recognized.

We recognized expense for increases to accrued interest and penalties related to unrecognized tax benefits in the income tax provision of $4 million, $11 million and $7 million, respectively, in fiscal 2025, fiscal 2024 and fiscal 2023. Accrued interest and penalties of $8 million and $33 million were recorded in the consolidated balance sheets as of April 25, 2025 and April 26, 2024, respectively.

The Organisation for Economic Co-operation and Development (“OECD”) recently enacted model rules for a new global minimum tax framework known as Pillar Two. These rules have been agreed to by most OECD members. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of Pillar Two rules. On February 1, 2023, the FASB indicated that they believe taxes imposed under Pillar Two is an alternative minimum tax. Accordingly, deferred tax assets and liabilities associated with the minimum tax would not be recognized or adjusted for the estimated future effects of the minimum tax but would be recognized in the period incurred. We are currently subject to Pillar Two rules starting in our fiscal year 2025. As of April 25, 2025, Pillar Two taxes do not have a significant impact on our financial statements, particularly due to the safe harbor relief during the transition period, but we are still closely monitoring developments.

The tax years that remain subject to examination for our major tax jurisdictions are shown below:

Fiscal Years Subject to Examination for Major Tax Jurisdictions at April 25, 2025

2022 — 2025

 

United States — federal income tax

2020 — 2025

 

United States — state and local income tax

2020 — 2025

 

Australia

2018 — 2025

 

Germany

2007 — 2025

 

India

2019 — 2025

 

The Netherlands

2018 — 2025

 

Canada

2020 — 2025

 

Japan

2019 — 2025

 

Cyprus

2022 — 2025

 

United Kingdom

2023 — 2025

 

France

2022 — 2025

 

Ireland

 

We are currently undergoing various income tax audits in the U.S. and audits in several foreign tax jurisdictions. Transfer pricing calculations are key topics under these audits and are often subject to dispute and appeals.

We continue to monitor the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. We engage in continuous discussion and negotiation with taxing authorities regarding tax matters in multiple jurisdictions. We believe that within the next 12 months, it is reasonably possible that either certain audits will conclude, certain statutes of limitations will lapse, or both. As a result of uncertainties regarding tax audits and their possible outcomes, an estimate of the range of possible impacts to unrecognized tax benefits in the next twelve months cannot be made at this time.

As of April 25, 2025, we continue to record a deferred tax liability related to state taxes on unremitted earnings of certain foreign entities. We estimate the unrecognized deferred tax liability related to the earnings we expect to be indefinitely reinvested to be immaterial. We will continue to monitor our plans to indefinitely reinvest undistributed earnings of foreign subsidiaries and will assess the related unrecognized deferred tax liability considering our ongoing projected global cash requirements, tax consequences associated with repatriation and any U.S. or foreign government programs designed to influence remittances.